House panel OKs new tax on power generators

Friday

May 25, 2007 at 12:01 AMMay 25, 2007 at 12:48 AM

SPRINGFIELD -- An Illinois House committee voted 5-4 Thursday night for a plan to impose a tax on power generators, including the ones that supply electricity to the Ameren Illinois utility companies and Commonwealth Edison.

Adriana Colindres

By ADRIANA COLINDRES

And JEREMY PELZER

STATE CAPITOL BUREAU

SPRINGFIELD -- An Illinois House committee voted 5-4 Thursday night for a plan to impose a tax on power generators, including the ones that supply electricity to the Ameren Illinois utility companies and Commonwealth Edison.

Supporters of the idea say the tax dollars will provide a way to give financial relief to consumers who have been burdened this year with higher electricity costs because a long-standing rate freeze expired. Opponents say it is unfair and will damage Illinois’ business climate.

The legislation, pushed by Rep. George Scully, D-Flossmoor, is in the form of an amendment to Senate Bill 1592.

The tax would amount to $70,000 per megawatt per year of a plant’s generating capacity, Scully said to members of the House Electric Utility Oversight Committee. Some generation plants would not have to pay the tax, including those owned by electric co-ops or municipalities, such as Springfield’s City Water, Light and Power.

Electric generation and utility companies, however, painted a somber picture of plant closings, fiscal uncertainty and higher costs for customers if the bill passes.

Ameren lobbyist Randy Mitchelson said that although the utility made $70 million during the first quarter of 2007, he expects the generation tax would cost it $320 million in the first year alone.

“It doesn’t take a rocket scientist by any means to figure out that our financial situation would be dire,” Mitchelson said. “This would make Illinois’ electricity and generating costs among the most expensive in the nation. It would dramatically, dramatically increase costs to all of our customers.”

Bob McDonald, chief financial officer of Commonwealth Edison, said the generation tax would “expose ComEd to very significant financial risks.”

“We will have to borrow money,” McDonald said. “(But) our ability to borrow is very limited.”

Part of Scully’s legislation would roll back electric rates to their 2006 levels, freeze them for a year and require the utility companies to refund consumers for the extra money they’ve paid in 2007 because of the higher rates.

Scully estimated the money from the generation tax would total slightly less than $2 billion a year. Those dollars would go into a new state fund called the Consumers Overbilled and Reimbursed for Electricity Fund. The state Department of Revenue would dip into that fund to pay back ComEd, AmerenCIPS, AmerenIP and AmerenCILCO for the refunds they issue to customers.

Scully called the proposed tax “a tax on the privilege of operating a power plant.”

“It is a burden to the state of Illinois to be the host” to such plants, he said.

Rep. Bob Flider, R-Mount Zion, praised the proposal.

“It takes away the argument from the utilities that they’ll go bankrupt” if lawmakers approve a rate rollback and freeze, he said.

David Kolata, executive director of the Citizens Utility Board, said that even though ComEd and Ameren Illinois claim a renewed electric rate freeze could lead to bankruptcy, their parent companies — Exelon and Ameren Corp. — are producing big profits.

“I think this is a very creative way, and it’s potentially a very elegant solution, to say, ‘OK, Ameren, you’re saying the money isn’t in the utility, it’s in the generating company? We’ll put a tax or a surcharge on those generation assets here in the state of Illinois and then use those proceeds to fund the refunds that customers are owed,’” Kolata said.

But Rep. David Winters, R-Shirland, called the plan “a huge tax.”

The generators would continue to pay the same tax indefinitely, even though the legislation gradually would reduce the amount of money earmarked for electric rate relief, he said. As a result, the General Assembly would find itself with a “huge source” of funds in five years, Winters said.

To become law, the revised legislation must pass in the full House and in the Senate and then be signed by the governor.

It was unclear Thursday how far the measure might advance.

Sen. Gary Forby, a Benton Democrat who would sponsor the bill if it returns to the Senate, said he has not yet reviewed the generation-tax proposal.

“I’m going to be skeptical, a little bit, on putting a generator tax on,” Forby said, adding that it could frighten off other generators considering a move to Illinois.

Adriana Colindres can be reached at (217) 782-6292 or adriana.colindres@sj-r.com. Jeremy Pelzer can be reached at (217) 782-3095 or jeremy.pelzer@sj-r.com.